Axon Enterprise Trades Near 52-Week High: Should You Buy Now or Wait?

Shares of Axon Enterprise, Inc. AXON have been showing impressive gains of late, trading close to its 52-week high of $765.00. The stock closed at $758.57 on Monday, 0.8% below the highest point. Shares of the conducted energy devices (CEDs) manufacturer have surged 27.7% year to date, outpacing the Zacks sub-industry’s and the S&P 500’s growth of 14.4% and 0.1%, respectively.

The company’s peers, including Kratos Defense & Security Solutions, Inc. KTOS and Teledyne Technologies Incorporated TDY, have gained 44.2% and 6.5%, respectively, over the same time frame.

AXON Outperforms Industry & S&P 500

The stock is also trading above both its 50-day and 200-day moving averages, indicating solid upward momentum and price stability. This reflects a positive market sentiment and confidence in the company's financial health and long-term prospects.

AXON Shares’ 50-Day and 200-Day SMA

Factors Driving the Stock

The strongest driver of Axon Enterprise’s business at the moment is solid momentum in its Connected Devices segment. The segment’s revenues increased 26.1% year over year in the first quarter of 2025. The company continues to witness growing popularity for its next-generation TASER 10 products, whose shipment began in 2023. Growth in cartridge revenues, driven by the higher adoption of the TASER products, has been driving the segment’s performance.

Axon Enterprise introduced its next-generation body-worn camera, Axon Body 4, in April 2023. With upgraded features such as a bi-directional communications facility and a point-of-view camera module option, this body camera is generating significant demand, thus bolstering the segment’s growth. Shipment of this body camera began in June 2023 and the customer response has been impressive so far.

An increase in the aggregate number of users to the Axon Enterprise network is aiding the Software & Services segment. After witnessing a year-over-year 33.4% jump in 2024, revenues from the segment also increased 39% in the first quarter. Continued momentum in digital evidence management and increased demand for premium add-on features are driving the segment’s growth.

Adoption of premium subscription plans also continues to rise as more customers recognize the value of enhanced capabilities. This ongoing expansion supports a growing base of annual recurring revenues (ARR). Strong customer alignment, broader adoption across sectors and continuous product innovation led Axon Enterprise to raise its guidance for 2025.

AXON now expects revenues to be in the band of $2.60-$2.70 billion compared with $2.55-$2.65 billion expected earlier, indicating growth of approximately 27% year over year at the midpoint.

The company’s strategic partnership with other companies enables it to expand its product offerings and customer base. In June 2024, Axon Enterprise entered into a partnership with Skydio (a leading U.S. drone manufacturer) to introduce a comprehensive line of drones in public safety that includes a scalable Drone as First Responder (DFR) solution. The combined offering will support the company’s DFR programs across its customer base and strengthen its market position in this category.

Better-Than-Industry Returns

Axon Enterprise’s trailing 12-month return on equity (ROE) is indicative of its growth potential. ROE for the trailing 12 months is 21.98%, higher than the industry’s 11.08%. This reflects the company’s efficient usage of shareholder funds. In comparison, ROE for its peers, Kratos Defense & Security Solutions and Teledyne Technologies, is pegged at 5.68% and 9.95%, respectively.

Earnings Estimate Revision

Earnings estimates for AXON have moved north over the past 30 days, reflecting analysts’ optimism. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

The Zacks Consensus Estimate for 2025 earnings is pegged at $6.15 per share, reflecting an increase of 0.7% in the past 30 days. The figure indicates year-over-year growth of 3.5%. The consensus mark for 2026 earnings is pinned at $7.55 per share, increasing 0.3% in the past 30 days. The figure also indicates year-over-year growth of 22.8%.

AXON’s Near-Term Concerns

Despite the positives, the escalating costs and expenses are a concern for Axon Enterprise’s bottom line. In 2024, its cost of sales soared 39% year over year on higher wages and stock-based compensation expenses. The metric, as a percentage of sales, was 40.4% in the year, up 160 basis points. The trend followed in first-quarter 2025, with the cost of sales increasing 18.2% year over year. Also, the company’s quarterly selling, general and administrative expenses increased 48% year over year.

Stretched Valuation

AXON’s lofty valuation remains another concern. The stock is trading at a forward 12-month price-to-earnings (P/E) ratio of 112.59X, significantly higher than the industry average of 42.04X. This elevated valuation could make the stock vulnerable to further pullbacks if market sentiment sours. In comparison with AXON’s valuation, Kratos Defense & Security and Teledyne Technologies are trading at 67.16X and 22.07X.

Our Final Take

Strong momentum across the Connected Devices and Software & Services segments, along with its investments in the AI space, drones and robotics, positions AXON favorably for impressive growth in the long run. Also, its collaboration with other companies to enhance public safety offerings and positive earnings estimates instill investor confidence. However, a few challenges, such as escalating operating expenses and premium valuation, are limiting this Zacks Rank #3 (Hold) company’s near-term prospects.

While current shareholders should hold their positions, new investors should wait for the stock to retract some of its recent gains and provide a better entry point. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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